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Thu 22 Jul 2010 08:37 AM

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UAE investment firm eyes two 'substantial' deals

Abu Dhabi company says hoping to confirm first major private equity deal next month.

UAE investment firm eyes two 'substantial' deals
INVESTMENT DEALS: Abu Dhabi investment firm The National Investor (TNI) is planning two “substantial” private equity transactions by the end of this year. (ITP Images)

Abu Dhabi investment firm The National Investor (TNI) is planning two “substantial” private equity transactions by the end of this year.

“We have capital to invest; we generally do about two deals a year and we will do the same this year,” TNI private equity director Yahya Jalil told Arabian Business.

In terms of large-scale transactions, Jalil said that the firm was working on “something substantial” right now, although he couldn’t reveal any details.

“Hopefully, we are about to get the first one done in the next three or four weeks, hopefully the second one somewhere in the second half of this year, before we close.”

TNI was part of a consortium – also consisting of Investcorp and the Eastgate Capital Group - that led the largest private equity transaction in the Gulf last year. The group invested an estimated $275m to buy a 70 percent stake in jewellery firm L’azurde.

A report released on Monday by the Gulf Venture Capital Association said there were some grounds for optimism for the embattled local private equity system, given that firms had raised $1.25bn in the first quarter, an eighteen percent increase over the whole of 2009.

Jalil also said that TNI was planning to launch a private equity fund that will target distressed opportunities in the MENA region by mid-September.

“Obviously there have been a couple of efforts that have already been announced that have focused on distressed real estate assets,” the director added.

“The idea with this fund is to focus in the non-real estate sector, but also to do it in a Sharia-compliant way, which is something we think hasn’t been looked at before."

Jalil said that the fund’s target would target secondary buy-outs, or companies that had made investments or acquisitions over the last three to four years but over the last 12 months find themselves unable to hold those positions due to liquidity constraints.

In addition, the fund will also look at balance sheet recapitalisations.

“What we’ve seen in the market over the past few years is that businesses are sometimes over-leveraged and banks have been and are continuing to go through the process of cleaning up poor credit. Those lenders are keen for private equity firms such as us to come in and clean up the balance sheets of some of the credit they have lent to,” added Jalil.

“That can either happen in the form of a debt-for-equity swap – effectively deleveraging the business - or in some cases the fund will be set up to look at purchasing discounted credit effectively as a way to equity control of the company rather than direct equity control.”

Jalil said the fund would additionally focus on special situations, especially stranded assets belonging to large conglomerates or family-run businesses that are suffering from liquidity constraints.

The executive said that the idea would be to invest in those assets, which might be otherwise fundamentally sound, and then capitalise them adequately for future growth.

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